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Business LibreTexts

8: Financial Structure, Transaction Costs, and Asymmetric Information

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    Learning Objectives

    By the end of this chapter, students should be able to:

    • Describe how nonfinancial companies meet their external financing needs.
    • Explain why bonds play a relatively large role in the external financing of U.S. companies.
    • Explain why most external finance is channeled through financial intermediaries.
    • Define transaction costs and explain their importance.
    • Define and describe asymmetric information and its importance.
    • Define and explain adverse selection, moral hazard, and agency problems.
    • Explain why the financial system is heavily regulated.

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